OBR Sets Out How Its UK-Wide Forecasts Feed Into Devolved Government Funding

The Office for Budget Responsibility has published a new article explaining how its official economic and fiscal forecasts underpin funding calculations for Scotland, Wales and Northern Ireland under the UK’s devolved fiscal frameworks.

The OBR produces at least two official UK economic and fiscal forecasts each financial year, covering a minimum five-year horizon, and those figures shape the spending settlements that flow through to devolved administrations via the Barnett formula and block grant adjustments. The body holds a statutory mandate under the Budget Responsibility and National Audit Act 2011 to examine and report on the sustainability of the UK public finances — and it is legally required, under the Scotland Acts of 2012 and 2016 and the Wales Act 2014, to produce separate forecasts for taxes devolved to Scotland and Wales alongside its UK-wide projections.

Those devolved tax forecasts — covering revenues such as devolved income tax, Land and Buildings Transaction Tax and Landfill Tax — are used to calculate block grant adjustments, which modify the baseline funding that devolved governments receive. HM Treasury does not produce its own macroeconomic forecasts, relying instead on OBR projections to underpin UK fiscal policy decisions. The OBR also holds a reciprocal statutory duty of co-operation with the Scottish Fiscal Commission to support consistent and transparent forecasting of devolved Scottish taxes and welfare expenditure.

Kent sits outside any devolved administration, but the figures still matter here.

OBR UK-wide forecasts of income tax, VAT and corporation tax underpin UK government spending plans, which in turn drive funding to NHS England allocations for the NHS Kent and Medway Integrated Care Board, school budgets, and national infrastructure spending on Kent’s roads and rail. Devolved funding settlements for Scotland, Wales and Northern Ireland can also influence overall UK budget priorities and relative funding pressures on England through UK-wide spending reviews — meaning the technical detail of block grant adjustments is not entirely remote from what Kent County Council and Medway Council eventually receive.